I’m Too Busy to Think About Profits!

On several occasions, I’ve presented to Jack Welch — while I worked for GE and also when I worked for a distributor Jack invested in. It won’t surprise you to hear that Jack expects you to generate profits: he demands earnings growth, every year. If you don’t, he’ll find someone who will.

To say that operating reviews with Jack are extremely candid is like saying that executions have a primary purpose. He dives deep into your numbers, ideas and plans with relentless zeal. You get rapid-fire, detailed questions that test to see if you have absolute mastery of your business, your customers, your competitors and your industry. Woe unto you if you can’t answer them.

The executive team from my division at GE presented to Jack three times per year. We prepared for about a month for each meeting. That means we spent a total of three months — 25% of our time — doing almost nothing but thinking about the business, evaluating the numbers, getting information about the market, competitors, customers, etc.

I believe we knew our business, our industry, our operating metrics and best practices for driving profits better than any competitor because we spent more time working on it. We knew the ultimate test of our expertise was coming soon and we’d have to retake it every four months.

Strategy Must Drive Profits

When I meet with the CEOs of distributors, I often wonder how they’d do in a meeting with Jack Welch. In contrast with GE, where strategic planning was a continuous, relentless and vibrant activity that was all about growing profits, many distributors don’t do it at all. Or, it’s a soft activity that is mostly inwardly focused and isn’t linked directly to the budgeting process.

Most major distributors have a budgeting process, of course, but it’s usually just a bottoms-up roll-up. It’s not connected to a strategy and it’s not developed with an ever-present, profound fear of Jack. Many companies go through multiple rounds of budgeting because CEOs often don’t set clear expectations up front: “Let’s see what the field comes up with on their own.”

I did not find Jack Welch reticent to communicate expectations around numbers.

Jack set demanding goals and our job was to find a way to meet them. We looked under every rock and behind every line on the budget to squeeze out more revenue, take out more expense and deliver that bottom-line number he expected. And you had to get better and smarter at it, month after month, quarter after quarter, year after year. You had to outthink, outwork, out-study and out-execute your competition — and if that’s not the definition of a strategy-driven company, then you’re doing it wrong.

If You Don’t Have Time to Learn About Profitability, What Are You Doing Instead?

“I don’t need to grow my profits,” said no CEO, ever. The reality is that every single thing you want do with your company is funded by your ability to generate income. Want to make an acquisition? Hire more talent? Put in new technologies? Improve training? Pay bigger bonuses? Make donations to your favorite charities? Sell your company?

If you grow profits, you can do any of these. If you don’t, you can’t. Profit growth is the true measure of business leadership. If you don’t have time to learn how to drive more profits, your priorities are out of whack.

Where are Your Profit Opportunities?

I’ve been making some calls to invite people to our upcoming conference, MDM’s Pricing & Profitability Summit. By far, the most common reason I hear that people can’t attend is that they’re “too busy.”

Really? You have something better to do than attend a conference with a bunch of experts and distribution leaders who have come together to learn how to improve profits?

We’ve got a great lineup of speakers. This isn’t just a seminar on how to raise prices, although we’ll talk about smarter pricing practices, of course. But we also have long-time distribution executives and the best consultants in the business to teach you how to improve profitability across your business, from negotiating better with your suppliers to reducing your costs-to-serve to managing your balance sheet more effectively.

Take some time to do a deep dive on distributor profitability. If you have a conflict, then find someone in your organization to attend, take good notes, build some relationships and teach you what they learn.